Large Iowa Meatpacker in Illegal Immigrant Raid Files for Bankruptcy

The kosher meatpacking company in Iowa that has been struggling with criminal charges and huge fines for labor violations, a dwindling work force and declining demand among Jewish consumers since an immigration raid at its main plant, has filed for bankruptcy.

The filing late Tuesday by Agriprocessors Inc. signaled the demise of a company that has been operated by a single family: the owner, Aaron Rubashkin, and his son Sholom, who built the company into the country’s dominant supplier of kosher meat.

The company began to founder after 389 illegal immigrants, about half its work force, were arrested on May 12 in a raid at its plant in Postville, Iowa. The immigrants reported under-age employees and what they said were abusive work conditions to the authorities.

Although demand for Agriprocessors’ products declined after the raid, supermarkets and butcher shops nationwide supplying Jews who observe strict dietary laws reported shortages of kosher meat this week, after the plant stopped slaughtering cattle a week ago. Agriprocessors sells meat under the Rubashkin’s, Aaron’s Best and Shor Habor labels, among others.

“It’s chaos out there; the shortage is all over the country,” said Menachem Lubinsky, the editor of koshertoday.com, which monitors kosher food markets. “Everybody has begun to scramble.”

In documents filed in bankruptcy court in the Eastern District of New York, Agriprocessors, whose headquarters is in Brooklyn, reported annual earnings of $300 million before the raid, the first revenue figures made public for the privately owned company. It reported debt of $50 million to $100 million.

Blaming “difficult circumstances involving a raid” for its financial woes, Agriprocessors, which filed under Chapter 11 of the bankruptcy code, said it was seeking new financing to restructure its business. It opted to declare bankruptcy after its major creditor, First Bank Business Capital of Missouri, foreclosed last week on a $35 million loan. The foreclosure is suspended while the bankruptcy proceeds.

“We are filing this to reinvigorate the company,” said Agriprocessors’s lawyer in the bankruptcy, Kevin J. Nash.

In Postville, a town of 2,200 in northeastern Iowa, residents said there was an unfamiliar calm on Wednesday as activity at the big plant at the edge of town fell to a low. Long before the raid, the Rubashkins had clashed with residents in Postville, where low pay, unpaid overtime and safety violations at the plant were a frequent subject of local gossip. But residents were deeply worried at the prospect that their largest employer by far would close.

“I think that people would prefer a different owner,” said the Rev. Paul Ouderkirk, the priest at St. Bridget’s Catholic Church in Postville, which has been supporting the families of dozens of immigrants arrested in the raid. “But it would be very, very tragic if the plant shut down.”

While Agriprocessors blamed the raid for its bankruptcy filing, Iowa labor experts said the company created many of its own troubles by hiring large numbers of illegal immigrants and paying them wages far below the industry standard, and by maintaining contentious relations with state labor authorities and fiercely resisting unions.

“They left themselves exposed by their utter refusal to play by the rules,” said Mark Grey, a sociology professor at the University of Northern Iowa who studies recent immigration to Iowa.

Union officials said the Postville plant stood out from other Iowa packinghouses for the frequency of its labor violations.

“If there was a hall of shame for employers in this industry, Agriprocessors would have its own wing,” said Mark Lauritsen, international vice president of the United Food and Commercial Workers, a union that has long tried to gain a foothold at the plant.

Demand for Agriprocessors’s brands began to decline after the company’s labor practices were criticized by a movement of Conservative and Reform Jews, who are seeking to add a new seal, known as Hekhsher Tzedek, to kosher-certified food. It would signify it was produced according to Jewish ethics.

Religious authorities at the Orthodox Union, the country’s major certifier of kosher food, said they were working with the top manager at Agriprocessors, Bernard S. Feldman, to find new owners or managers for the company. Mr. Feldman took charge of the company in late September.

If the Postville plant closes, it would leave “a significant void in the market that cannot easily be reproduced,” said Rabbi Menachem Genack, the chief executive of the kosher-certifying arm of the Orthodox Union.

Sholom Rubashkin, the former chief executive of Agriprocessors, was arrested last week by federal authorities on charges of conspiracy to harbor illegal immigrants. Sholom and Aaron Rubashkin were also facing state criminal charges in Iowa for employing more than 30 under-age workers at the plant, and Iowa labor authorities have levied $10 million in fines for wage violations.

In Postville, residents were dismayed by a report posted on a Jewish Web site, FailedMessiah.com, saying that Sholom Rubashkin held a celebration in Postville last week after he was released from detention on $1 million bail.

About 300 illegal immigrant workers, most of them from Guatemala, were convicted on federal charges after the raid. Most served five months in prison and were deported.

Correction: November 17, 2008

An article on Nov. 6 about the bankruptcy filing by Agri- processors Inc., a kosher meatpacking company with a plant in Postville, Iowa, where an immigration raid took place in May, misstated the name of one of the company’s meat brands. The error also appeared on Aug. 23 in an article about the immigration raid. The meat brand is Shor Habor, not Shor Harbor.

A version of this article appears in print on , on page A21 of the New York edition with the headline: Large Iowa Meatpacker in Illegal Immigrant Raid Files for Bankruptcy. Order Reprints|Today's Paper|Subscribe